How to Calculate Your Freelance Hourly Rate

The most common pricing mistake freelancers make is taking their old salary, dividing by 2,080 hours, and charging that. It leaves out taxes, business costs, time off, and the hours you spend on work nobody pays for. Here's how to work it out properly.

Step 1: Start with take-home pay

Decide what you want to keep after tax for the year. Say $60,000.

Step 2: Add tax

If around 28% of your profit goes to tax, you need $60,000 ÷ (1 − 0.28) ≈ $83,300 in profit.

Step 3: Add business costs and a margin

Software, equipment, insurance, accounting: say $4,000 a year. Add a 10% margin for slow months and surprises: ($83,300 + $4,000) × 1.10 ≈ $96,100 in revenue.

Step 4: Count your real billable hours

This is where most people go wrong.

• Take 8 weeks off for holidays, sick days and gaps between projects. That leaves 44 working weeks.
• At 40 hours a week, that's 1,760 hours.
• But only about 60% of that is billable. The rest is sales calls, invoicing, email and learning. So you have about 1,056 billable hours.

Step 5: Divide

$96,100 ÷ 1,056 ≈ $91 an hour. That's your floor, not your target. Compare it to the salary shortcut ($60,000 ÷ 2,080 = $29) and you can see why so many freelancers feel busy and broke.

Turn it into day rates and retainers

• Day rate: hourly × 8, so about $728.
• Retainer for 20 hours a month: hourly × 20, so about $1,820.

Check it against the market

If your floor is above what clients in your niche pay, you have three levers: specialise so you can charge more, raise your billable share with less admin, or adjust the income goal. If it's well below the market, raise your rate. Your floor isn't what you're worth.